Facing competition, West Coast ports seek better rail links

Struggling to ride out the recession, West Coast ports face new competition as ports in Canada and Mexico, an expanded Panama Canal and even the Suez Canal could steal away some of the cross-Pacific shipping they've relied on. Their hopes to fight off those rivals may lie in a government commitment to improve U.S. rail service.

WASHINGTON — Struggling to ride out the recession, West Coast ports face new competition as ports in Canada and Mexico, an expanded Panama Canal and even the Suez Canal could steal away some of the cross-Pacific shipping they've relied on.

About the only threat that West Coast port executives aren't particularly concerned about is the opening of the Northwest Passage as global warming melts Arctic ice.

More than 70 percent of all Asian goods imported into the U.S. — everything from toys to electronics to autos to clothing — pass through the ports of Los Angeles, Long Beach and Oakland, Calif.; Seattle and Tacoma, Wash.; and Portland, Ore.

The directors of the ports, in a first-ever joint visit, were on Capitol Hill last week seeking billions of dollars and a federal commitment to improve rail corridors necessary to speed the goods east.

It was yet another sign that the business community is looking past the current economic downturn, and such mainstays as the nation's ports can take nothing for granted in an era of global competition.

"We need a well-thought-out, strategic freight policy," said Tim Farrell, executive director of the Port of Tacoma. "We need to focus on corridors from Shanghai to Chicago or Tokyo to Houston. We are just getting started, but the West Coast ports generate more jobs than the Big Three automakers."

The looming clash over Asian shipping routes is part geography lesson, part the dreams of naval architects as they design ultra-large cargo ships, and part a short course in shipping economics — all of it overlaid with concerns about greenhouse gas emissions and climate change.

Canada is already developing a national shipping strategy utilizing the Port of Vancouver and a new port at Prince Rupert, 900 miles north of Vancouver. Prince Rupert is roughly a day closer to Shanghai by freighter, and the trains from there to Chicago and other Midwest cities encounter fewer bottlenecks than eastbound trains from the U.S. West Coast.

Mexico has announced plans to build a mega-port at Punta Colonet on the country's Baja Peninsula and has made no secret of its interest in markets in the Southwest. Two other Mexican ports, Manzanillo and Lazaro Cardenas, could also provide competition. The existing Mexican ports handle cargo mostly for domestic Mexican consumption. However, rail times from the Mexican ports to Houston would be shorter than those from U.S. West Coast ports to Houston.

"Things have changed dramatically, and they could change even more dramatically in 2014 when the Panama Canal expansion is finished," said Tay Yoshitani, chief executive of the Port of Seattle.

Come 2014, a new set of locks in the Panama Canal will be completed, capable of handling container ships nearly double the size of those now using the canal. The large container ships could bypass West Coast ports entirely and head directly to such East Coast ports as Charleston, S.C., Norfolk, Va., and New Jersey-New York.

However, the biggest drawback to using the Panama Canal might be the fees it charges and the debt it needs to pay off for the new locks. Even now, the fees can range up to $250,000 for a large car carrier. Some shippers sail around Cape Horn at the tip of South America rather than pay the existing fees.

"The Panama Canal is not free," said Paul Bingham, the managing director for global commerce and transportation at the forecasting and consulting firm IHS Global Insight.

Goods from countries west of Singapore, such as India and Bangladesh, often come through the Suez Canal on their way to the U.S. East Coast. Though the Suez Canal is at sea level and doesn't have locks, tolls and fees for such things as pilots can run into the hundreds of thousands of dollars.

"In the very long term all of these gateways will be needed," Bingham said. The key for West Coast ports will be improved rail service to the East, he said. "They have to be very proactive."

At the heart of the congressional lobbying campaign by port directors was the reauthorization of the five-year Surface Transportation Act, which includes highways, roads, mass transit and the movement of freight. The current bill expires later this year.

The ports want the bill to include a greater emphasis on the freight rail corridors from the West Coast to eastern markets.

The funding would help augment improvements railroads are making already, including laying more track, upgrading signals and expanding or building new yards.

"The Canadians have already made it a national priority," Farrell said. "We are just getting started."

The House version of the bill creates a new undersecretary of transportation for freight transportation and authorizes $25 billion in discretionary spending for projects of national significance that would help eliminate bottlenecks in the rail corridors. The Senate version of the bill has yet to be written.

"The interest of the ports are very much aligned," Yoshitani said. "We need to look at this from the federal level."